What icons do newly-independent countries want to assert their identity?
A flag, an anthem, a passport and their own currency.

But eleven of the fifteen European nations that make up the union are about
to do the reverse: by the end of this year, they will have surrendered perhaps
their most important icon, their currency.

Countries rally round their flags and fight wars. Their resounding anthems
rouse their spirits. Their passports provide their citizens with a sense
of belonging in an increasingly globalized world. And the money their mints
print asserts their identity and power in the global economy. By giving up
their currencies, the countries demonstrate their conviction that their economic
interests are intertwined and enmeshed so closely that they can give up their
right to spend and save the way they want.

European Union was always something bigger than a common market. With 292
million inhabitants, Europe's population exceeds the population of the United
States (270 million) and Japan (127 million). The gross domestic product
of the euro area is equal to 76% of the GDP of the United States (5,774 billion
euros as against 7,592 billion euros), though it is higher than that of Japan
(3,327 billion euros). If only Britain were to join, the eurozone would be
a bigger economy than the US.

But Britain stands apart. It can't give up the comforting certainty of the
sterling pound, once the international currency of reserve, for the unreliable,
slippery-as-eel euro, which wants to acquire a dollar-like reputation without
having earned it.

British doubters say its economic cycle is more closely aligned to the US's,
and not Europe's (a point the International Monetary Fund recently endorsed);
that five vaguely worded financial tests have to be met (Britain meets most
of them, in any case); and that the euro is too weak.

But at heart the issue is of cultural identity. Surrendering the pound culminates
the decline of Britain as a major power since the end of the Second World
War. The colonies are gone, the Suez crisis showed that old gunboat diplomacy
wouldn't work, de Gaulle made Britain wait before it could join the ECM,
and in bombing Kosovo and Baghdad, Britain is often seen as the sole cheerleader
for US foreign policy interests.

Domestically, too, British icons are under threat. Chicken tikka masala,
and not fish and chips, is the country's favourite dish. British beef is
no longer safe. Telephone booths are disappearing, and the solid taxicab,
in which a gentleman could enter without having to take off his bowler hat,
now resembles an armoured personnel carrier, or a badly designed sports utility
vehicle, depending on your point of view. And foreigners are running every
institution that matters, from Marks and Spencer's to the football team,
from the London Underground to the Dome. Little wonder then, that Ffione
Hague wore a gold pendant made of the symbol of the pound at the Conservative
Party conference.

But the world is losing its patience. During a recent visit to Nairobi, I
discovered how little the pound mattered even in a former British colony.
"Don't you have any dollars?" the man at the till of Nairobi's Internet café
asked me when I offered to pay my bill in pounds. He reluctantly accepted
the £10 note, holding it in front of sunlight, as if he was handling
a currency as exotic as the ruble.

More important, foreign investors are grumbling. Japanese companies have
asked their British subsidiaries to begin quoting prices in euro, not pounds.
They have been pounding at the table, threatening the government they will
ship their plants and eliminate more jobs, if Britain continues to let its
heart rule its head.

Investor concern is valid because there are strong economic arguments for
Britain to join the eurozone, which include reduced exchange risks, lower
prices, more efficient markets, and prudent fiscal policies. The central
aim is to strengthen the European identity and make it acceptable. Its backers
see the euro as the logical follow-up to the common market allowing for free
movement of goods, capital and services.

But wouldn't the euro force countries to pursue economic policies that hurt
their population? Arguably, that's happening anyway as the Delphic utterances
of Alan Greenspan, the Governor of the Federal Reserve in the United States
move markets. That's the political rationale for the euro: to counter-balance
the influence of the United States dollar, which the Japanese yen has failed
to achieve.

That's the rub, too. The world takes Mr. Greenspan seriously because he has
the backing of political power. In the case of the euro, however much Wim
Duisenberg, the Dutch governor of the European Central Bank, might try to
appear like Mr. Greenspan, he lacks political backing. There is no equivalent
political authority standing behind Mr. Duisenberg. The result? A currency
that bobs up and down like the yo-yo, as the euro did much of the last year,
earning Mr. Duisenberg the undeserved epithet from Britain's jingoistic tabloid
press, Wim the Dim.

For ultimately, to succeed, the supporters of the euro will have to be candid
and proclaim that the new currency is as much about political union as it
is about the undoubtedly attractive economic arguments. As Thomas Risse of
the European University Institute argues, "The visions about European order
which give political meaning to European Monetary Union need to be understood
in the framework of identity politics."

Politicians want to avoid that debate. At its best, europhiles view the new
European identity as one based on Kantian "pacific federation". But because
it has been an elite-led process, without the consent of the people, euroskeptics
point out the underlying Hegelian disdain for the masses. When the issue
was tested, as in Denmark, people have voted against it. In Britain, too,
Gallup polls indicate rejection of the euro.

British euroskeptics correctly understand the political import. John Redwood
of the Conservative Party said once: "Abolish the pound and you abolish Britain.
You make a decisive move towards a country called Europe governed from Brussels
and Frankfurt.... [T]he intention is the establishment of a new country."
A euroskeptic website puts it more bluntly: "If we have the euro, our gold
and foreign currency reserves will be pooled and the unelected and unsackable
European Central Bankers will have total overall control. We will be taxed
extremely heavily to support Ireland, Spain, Portugal and Greece...."

These attitudes stem from the continued perception of Europe as the other
in British discourse. Britain was reluctantly drawn into the world wars;
diseases and immigrants wash British shores from Europe. From the time of
Caesar and Canute, the Continent has had designs on the unflappable island.
A fog in the Channel, as the famous newspaper headline once put it, "cut
off the Continent".

British identification with its icons is so potent that it outweighs affection
for European symbols. Here is a country where some venerate Turner more than
Van Gogh, Constable more than Matisse, and believe Elgar is as important
a composer as is Beethoven. The British crown represents the island's independence
from Rome and the Continent. The Mother of Parliaments symbolizes the superiority
of the will of the people over the will of the ruler. As Risse has succinctly
argued, "It is not surprising that British objections against transferring
sovereignty to European supranational institutions are usually justified
on grounds of lacking democratic - meaning parliamentary - accountability.
That this argument has more to do with collective national identity than
with concerns about democracy in Europe becomes obvious when the same British
leaders routinely object to strengthening the powers of the European Parliament."

Contrast that with Germany, which probably doesn't need the euro, yet is
enthusiastic about it. To understand that, read Thomas Mann, who wrote once:
"We do not want a German Europe, but a European Germany." The Maastricht
Treaty and EMU were efforts to contain a resurgent Germany, to prevent a
German Sonderweg, once the German question resurfaced on Europe's agenda.
The Bundesbank and the Deutsche Mark were two spectacular success stories
of post-war West Germany, yet the post-Wall Germany was willing to surrender
those successes to assure European neighbours that its militaristic past
was now buried deep.

France liked the euro for precisely that reason: it diminished German influence
over Europe. It was willing to let the franc go, if it meant the deutsche
mark would also go. (Interestingly, French nationalist naysayers like Charles
Pasqua have made their arguments on political grounds of identity; saying
that the end of the Cold War made the Gaullist idea of united Europe less
relevant).

WRITING ABOUT INDONESIA, Ben Anderson termed nations "imagined communities".
The European Union has been an imagined community for a long time. The common
currency-and the elimination of former currencies-is the strongest manifestation
of the region's collective desire to embrace a broader and firmer identity.

While the markets don't care about flags, anthems and passports, they do
care about currencies. Greater acceptance of the euro by financial markets
can only follow convincing steps towards political union. Markets trust currencies
which have the backing of a stable political power.

European leaders have avoided this discussion. Britain will have its choice
probably by 2003. Whatever decision the British people take at that time,
it would at least be based on the consent of the electorate. For the euro
not to become the victim of a backlash, the ECB will have to be given considerable
autonomy. Otherwise the currency will collapse, and with it, for a long time,
the hopes of a common European identity.